Whether to file your taxes for the vacation rental under schedule C or E has been discussed on the tax board and concluded widely in many places and tax books that it should be filed on schedule E. Recently, on another vacation rental board, I came across this experience:

I don't mean to muddy the waters here, but we just ended an ugly two year 2008 IRS audit and the findings were our taxes were done incorrectly by our CPA. The IRS stated we should be using Schedule C, not Schedule E for the overnight rental cabin.

If anything interesting comes up on that thread, I will post it here, as you have to sign up for that Yahoo board. It's well worth watching. Vacation rentals as an industry are exploding in popularity. Perhaps the IRS ignored it for the most part, but now realize they left a good deal of money on the table, if only in social security taxes. I can't help but wonder if this ruling is a sign to come.

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